REG-Rostelecom OJSC Statement re Rostelecom IFRS Financial and Operating Results Highlights for the Second Quarter and First Half Of

Rostelekom PAOAnnouncement

10/08/2016 13:20

      Statement re Rostelecom IFRS Financial and Operating Results Highlights       for the Second Quarter and First Half Of 2016    
    
      ROSTELECOM IFRS FINANCIAL AND OPERATING RESULTS HIGHLIGHTS FOR THE       SECOND QUARTER AND FIRST HALF OF 2016    
      Moscow, Russia  August 10, 2016 - Rostelecom PJSC (MOEX: RTKM,       RTKMP; OTCQX: ROSYY), Russias national telecommunications operator,       today announces its consolidated financial results for the second       quarter and first half of 2016 prepared in accordance with IFRS1.       The results highlights are as follows:    
      KEY ACHIEVEMENTS    
      
        The digital segments2 contribution to total revenue         reached 44%;      
      
        Rostelecom accounted for more than a half of the new subscriptions         achieved in the pay-TV market (59%)3 and broadband market         (63%)4;      
      
        Total fibre optic network coverage reached 31.7 million households by         the end of the second quarter of 2016.      
    
      SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS    
      
        Revenue amounted to RUB 71.8 billion compared to RUB 72.1 billion in         the second quarter of 2015;      
      
        OIBDA5 amounted to RUB 22.7 billion compared to RUB 25.4         billion in the second quarter of 2015;      
      
        OIBDA margin of 31.6% compared to 35.1% in the second quarter of 2015;      
      
        Net profit amounted to RUB 1.6 billion compared to RUB 6.1 billion in         the second quarter of 2015;      
      
        CAPEX6 increased by 33% year-on-year to RUB 14.8 billion         (20.6% of revenue) from RUB 11.1 billion (15.4% of revenue) in the         second quarter of 2015;      
      
        Free Cash Flow (FCF)7 was RUB -5.7 billion compared to RUB         6.1 billion in the corresponding period of last year;      
      
        Net debt8 increased by 5% since the beginning of the year         and amounted to RUB 182.5 billion, resulting in a Net Debt/OIBDA ratio         of 1.9x.      
    
      Sergei Kalugin, President of Rostelecom, commented:    
      We continued to make progress on the development of our business in       the second quarter of 2016, which provides stability in the face of       lower interconnection and traffic transit demand on overall revenue       growth.    
      The digital sector continued to display strong growth dynamics in the       second quarter, as we built up our subscriber base in the broadband and       pay-TV market and attracted more than half of all new subscribers coming       to the market. As a result, we were able to strengthen our competitive       position by increasing market share to deliver an 11% rise in income in       the digital segment.    
      Two major events led to a RUB 2.7 bln reduction in OIBDA during the       second quarter of 2016, including reduced funding for the "Bridging the       Digital Divide" project (RUB 1 bln.), and a one-off increase in bad debt       expense accruals (RUB 0.6 billion), mainly due to changes in the       technical ratio used to calculate bad debt reserve expenses.    
      Our shareholders continue to benefit from a progressive dividend       policy, one that saw our June AGM approve the payment of a dividend that       is more than 70% higher than our previous payout. This is a considerable       achievement, and one that reflects Rostelecoms focus on maximising       shareholder value and improving its investment case. We are aiming to       accomplish a great deal more operationally during the remainder of 2016,       both in terms of improving internal efficiency and increasing revenues       to ensure that shareholder remuneration remains in line with the current       dividend policy.    
      Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer,       added:    
      The first half of 2016 saw an abnormally high level of investment       activity, which contributed to our negative cash flow position, however       this will be offset by a lower level of investment in the second half,       with capital expenditure anticipated to be less than 19% of revenues,       excluding the "Bridging the Digital Divide project. Our operational and       financial results for the second quarter are in line with our       expectations and we reaffirm our guidance for 2016. Our revenues will       grow by 1-2%. At the same time there is a possibility that the       reimbursement terms agreed as part of the BDD contract will be placed       under review. As it stands, we expect OIBDA to remain at the same level       as seen in 2015, provided that the terms stipulated in the "Bridging the       Digital Divide" project contract remain unchanged.    
      OTHER INFORMATION: CONFERENCE CALL    
      Rostelecoms management will hold a conference call and webcast today at       6.00 PM (Moscow), 5.00 PM (CET), 4.00 PM (UK) and 11.00 AM (NYT). To       participate in the conference call, please dial:    
      Russia +7 495 213 0977
UK/ International: +44(0) 20 3427 1910
US:       +1 212 444 0895    
      Access Code: 4994194    
      A webcast of the conference call will be available at: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=3815.    
      A replay of the conference call will be available on the Companys       website http://www.rostelecom.ru/en/ir/results_and_presentations/financials/IFRS/2016/2/       in due course.    
      Rostelecom (www.rostelecom.ru)       is one of the largest national telecommunications operators in Russia       and Europe. The Company operates in all segments of the       telecommunications market and covers millions of households in Russia.    
      Rostelecom is an undisputable leader of the broadband and pay-TV markets       in Russia with over 12.0 million fixed-line broadband subscribers and       over 9.0 million pay-TV subscribers, over 3.9 million of which are       subscribed to Rostelecoms IPTV services.    
      In the first half of 2016 the Group generated RUB 144.3 billion of       revenues, RUB 47.4 billion of OIBDA (32.8% of revenue) and RUB 4.6       billion of net income.    
      The Group is a market leader in providing telecommunications services to       government bodies and corporates of all levels.    
      Rostelecom is an important innovator that provides solutions in the       field of E-Government, cloud computing, healthcare, education, security       and housing & utility services.    
      The Groups stable financial position confirmed by its credit ratings.       Rostelecom was assigned BBB- and BB+ international credit ratings by       Fitch Ratings and Standard&Poors respectively.    
      * * *    
      Certain statements in this press release are forward-looking statements       within the meaning of the U.S. federal securities laws and intended to       be covered by the safe harbours created thereby.    
      Those forward-looking statements include, but are not limited to:    
      
        Assessment of Rostelecoms PJSC (the Company) future operating and         financial results as well as forecasts of the present value of future         cash flows and related factors;      
      
        The Companys plans to take ownership stakes in other organisations;      
      
        the Companys anticipated capital expenditures and plans to construct         and modernize its network;      
      
        the Companys expectations as to the growth in demand for its         services, plans relating to the expansion of the range of its services         and their pricing;      
      
        the Companys plans with respect to improving its corporate governance         practices;      
      
        the Companys expectations as to its position in the         telecommunications market and forecasts on the development of the         market segments within which the Company operates;      
      
        economic outlook and industry trends;      
      
        the Companys expectations as to the regulation of the Russian         telecommunications industry and assessment of impact of regulatory         initiatives on the Companys activity;      
      
        other statements regarding matters that are not historical facts.      
    
      Such forward-looking statements are subject to risks, uncertainties and       other factors, which could cause actual results to differ materially       from those expressed or implied by these forward-looking statements.       These risks, uncertainties and other factors include:    
      
        risks relating to changes in political, economic and social conditions         in Russia as well as changes in global economic conditions;      
      
        risks relating to Russian legislation, regulation and taxation,         including laws, regulations, decrees and decisions governing the         Russian telecommunications industry, securities industry as well as         currency and exchange controls relating to Russian entities and their         official interpretation by regulatory bodies;      
      
        risks relating to the Company, including the achievement of the         anticipated results, levels of profitability and growth, ability to         create and meet demand for the Companys services including their         promotions, and the ability of the Company to remain competitive in a         liberalized telecommunications market;      
      
        technological risks associated with the functioning and development of         the telecommunications infrastructure, technological innovations as         well as the convergence of technologies;      
      
        other risks and uncertainties. For a more detailed discussion of these         and other factors, see the Companys Annual Report and the Companys         other public filings.      
    
      Many of these factors are beyond the Companys ability to control or       predict. Given these and other uncertainties, readers are cautioned not       to place undue reliance on any of the forward-looking statements       contained herein or otherwise. The Company does not undertake any       obligation to release publicly any revisions to these forward-looking       statements (which are made as of the date hereof) to reflect events or       circumstances upon the annual report publication or to reflect the       occurrence of unanticipated events, except as may be required under       applicable laws.    
      1 International financial reporting standards.    
      2 The digital segment comprises broadband, pay-TV, VPN, VAS       and cloud services.    
      3 According to data by the analytical agency Telecom Daily    
      4 According to data by the analytical agency TMT-consulting    
      5 Here and below, please refer to Attachment 1 of this       statement for a full definition of OIBDA.    
      6 Here and below, capital expenditure (CAPEX) comprises       cash spent on fixed assets and intangible assets.    
      7 Here and below, FCF is calculated as free cash flow from       operating activity minus CAPEX, plus proceeds from selling fixed assets       and intangible assets    
      8 Here and below, Net Debt is calculated as total debt less       cash, cash equivalents and short-term investments (other financial       assets).    
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      Rostelecom OJSC